According to Morningstar portfolio analysis, Vanguard Small Cap index (naesx) is roughly, 65% mid cap and 35% small cap. Looks like it is weighted significantly towards mid cap. Am I missing something obvious? I am currently reallocating my portfolio and the ratio of mid cap and small cap allocation in this fund has definitely changed according to Morningstar, and this is important to my reallocation. thanks for any responses.

According to Morningstar portfolio analysis, Vanguard Small Cap index (naesx) is roughly, 65% mid cap and 35% small cap. Looks like it is weighted significantly towards mid cap. Am I missing something obvious? I am currently reallocating my portfolio and the ratio of mid cap and small cap allocation in this fund has definitely changed according to Morningstar, and this is important to my reallocation. thanks for any responses.

birdsgears:

The Vanguard Small Cap Index Fund (NAESX) benchmark is the CRSP US Small Cap Index which tracks "the bottom 2%-15% of the investable market capitalization."

Taylor,
thanks, sounds like the Vanguard small cap is really a small to mid in the older definition and I should allocate accordingly, meaning I stop using the Vanguard Mid-cap Index to achieve the allocations to large, medium, and small that I want for domestics. I will move to a combination of the Vanguard 500 Stock Index and Small cap index. Works for me.

Taylor,
thanks, sounds like the Vanguard small cap is really a small to mid in the older definition and I should allocate accordingly, meaning I stop using the Vanguard Mid-cap Index to achieve the allocations to large, medium, and small that I want for domestics. I will move to a combination of the Vanguard 500 Stock Index and Small cap index. Works for me.

Good plan. Mid-cap CRSP doesn’t add much. I personally prefer the deeper small premium of the S&P600 (value too) but you have the right idea, simplify .

There is no one true definition of the word "Smallcap". The Vanguard fund defines it as the smallest 15% of the market by market cap (if I'm remembering correctly).

Well, sometimes close enough is close enough. Mid-Caps perform in a similar fashion to Small-Caps, tend to have a little less return with a little less volatility. Many feel that Mid-Caps are the "sweet spot" of the stock market. I would not obsess over this.

There is no one true definition of the word "Smallcap". The Vanguard fund defines it as the smallest 15% of the market by market cap (if I'm remembering correctly).

Well, sometimes close enough is close enough. Mid-Caps perform in a similar fashion to Small-Caps, tend to have a little less return with a little less volatility. Many feel that Mid-Caps are the "sweet spot" of the stock market. I would not obsess over this.

+1 on this, which is why I landed in Mid-Cap land a while back.... Even on Midcaps there is no single definition. And with M* having moved their breakpoints around, it looks like lots of formerly small is now leaking into mid and what was formerly mid is leaking more into large. I tend instead to run FF regressions on portfoliovisualizer to at least get a relative feel for small-ness and valuey-ness these days....

There is no one true definition of the word "Smallcap". The Vanguard fund defines it as the smallest 15% of the market by market cap (if I'm remembering correctly).

Well, sometimes close enough is close enough. Mid-Caps perform in a similar fashion to Small-Caps, tend to have a little less return with a little less volatility. Many feel that Mid-Caps are the "sweet spot" of the stock market. I would not obsess over this.

+1 on this, which is why I landed in Mid-Cap land a while back.... Even on Midcaps there is no single definition. And with M* having moved their breakpoints around, it looks like lots of formerly small is now leaking into mid and what was formerly mid is leaking more into large. I tend instead to run FF regressions on portfoliovisualizer to at least get a relative feel for small-ness and valuey-ness these days....

Fill in the blank: ________ is in the eye of the beholder. We like to believe that everything is neat and precise in the investing world but it just isn't so. Definitions of such things as Small-Cap and Value are slippery. For example, Morningstar defines Small-Cap as the bottom 9% of stocks by market cap whereas CRSP has a 15% definition. As far as Value, there are at least a couple major schools of thought regarding Value. There is the academic definition and the intrinsic value definition as given by disciples of Benjamin Graham. Close enough is close enough.

Well, sometimes close enough is close enough. Mid-Caps perform in a similar fashion to Small-Caps, tend to have a little less return with a little less volatility. Many feel that Mid-Caps are the "sweet spot" of the stock market. I would not obsess over this.

Although most of the benefit of small-cap investing comes from avoiding the top two deciles of investable stocks, that effectively means that the small cap premium happens most strongly in stocks with market caps under $2 billion.

The median market cap of NAESX is more than twice that, which is why the S&P 600-based funds (like VIOO) are so much more exposed to the size premium.

"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Well, sometimes close enough is close enough. Mid-Caps perform in a similar fashion to Small-Caps, tend to have a little less return with a little less volatility. Many feel that Mid-Caps are the "sweet spot" of the stock market. I would not obsess over this.

Re: "the sweet spot"

Not according to Larry Swedroe and Kevin Grogan. See many references to "Reducing the Risk of Black Swans".

The gist of the argument is that by going very small and valuey you increase returns but increase risk. Then by modifying your AA by adding more bonds you get your risk back to where your started but maintain the yield advantage. You reduce the "tail" risk in the distribution both plus and minus.

A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

The median market cap of NAESX is more than twice that, which is why the S&P 600-based funds (like VIOO) are so much more exposed to the size premium.

It's also worth noting that due to the cap weighted nature of these indexes, most of your invested dollars are steered towards the larger companies. Even though the CRSP small cap index goes pretty small, the biggest few companies tend to dominate the index. Just like you see with total market indices.

Vanguard small cap, per CRSP's illustration, has both larger and smaller companies compared to the S&P 600 index. Cap weighting results in more mid-cap exposure. It might match everyone's expectations more closely to describe NAESX as "non large cap".

Well, sometimes close enough is close enough. Mid-Caps perform in a similar fashion to Small-Caps, tend to have a little less return with a little less volatility. Many feel that Mid-Caps are the "sweet spot" of the stock market. I would not obsess over this.

Although most of the benefit of small-cap investing comes from avoiding the top two deciles of investable stocks, that effectively means that the small cap premium happens most strongly in stocks with market caps under $2 billion.

The median market cap of NAESX is more than twice that, which is why the S&P 600-based funds (like VIOO) are so much more exposed to the size premium.

I own an ETF based on the S&P 600 Small-Cap Index and have been very pleased with it. I also own a Micro-Cap Index EFT and though the performance has been okay, I have been somewhat disappointed with it. Morningstar says that I may as well have been in the Vanguard Small-Cap Index. Smaller is not always better. Front running was a big problem with the Micro-Cap Index ETF. Oh well. Also, as you go smaller and smaller with market cap, liquidity gets to be an issue. Thus you see a lot of the more liquid Mid-Caps in Small-Cap funds.

Well, sometimes close enough is close enough. Mid-Caps perform in a similar fashion to Small-Caps, tend to have a little less return with a little less volatility. Many feel that Mid-Caps are the "sweet spot" of the stock market. I would not obsess over this.

Re: "the sweet spot"

Not according to Larry Swedroe and Kevin Grogan. See many references to "Reducing the Risk of Black Swans".

The gist of the argument is that by going very small and valuey you increase returns but increase risk. Then by modifying your AA by adding more bonds you get your risk back to where your started but maintain the yield advantage. You reduce the "tail" risk in the distribution both plus and minus.

I don't know, Mel Lindauer likes them. I have too.

Do understand the theory behind Small/Value tilts. Mostly I have done this with Vanguard Small-Cap Value Index ETF which has a lot of Mid-Caps and is not too valuey. But so far it has been good enough. These type of funds are not easy too find, the ones you find have their flaws. Many have expense ratios higher than what many Bogleheads will tolerate. Don't have access to Dimensional Fund Advisors though I could probably get a Bridgeway fund.

These type of funds are not easy too find, the ones you find have their flaws. Many have expense ratios higher than what many Bogleheads will tolerate.

Yep.

The tilting strategies are easier in theory than they are in practice. This is true of other investment strategies as well. One reason a lot of folks have thrown in the towel and just index. I guess I am an eternal optimist.

The tilting strategies are easier in theory than they are in practice. This is true of other investment strategies as well. One reason a lot of folks have thrown in the towel and just index. I guess I am an eternal optimist.

How about an ETF?

e/r 0.25%

A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

It's also worth noting that due to the cap weighted nature of these indexes, most of your invested dollars are steered towards the larger companies. Even though the CRSP small cap index goes pretty small, the biggest few companies tend to dominate the index. Just like you see with total market indices.

Yes, total stock market puts $1 of every $8 in just 5 stocks. And, per m*, nearly 50% is not just large, but giant cap.

The tilting strategies are easier in theory than they are in practice. This is true of other investment strategies as well. One reason a lot of folks have thrown in the towel and just index. I guess I am an eternal optimist.

If someone is willing to use ETFs, it doesn’t seem like it would be hard. Equal portions in VTI, VIOV, VXUS, and VGLT would be a killer portfolio.

The tilting strategies are easier in theory than they are in practice. This is true of other investment strategies as well. One reason a lot of folks have thrown in the towel and just index. I guess I am an eternal optimist.

The tilting strategies are easier in theory than they are in practice. This is true of other investment strategies as well. One reason a lot of folks have thrown in the towel and just index. I guess I am an eternal optimist.

The tilting strategies are easier in theory than they are in practice. This is true of other investment strategies as well. One reason a lot of folks have thrown in the towel and just index. I guess I am an eternal optimist.

If someone is willing to use ETFs, it doesn’t seem like it would be hard. Equal portions in VTI, VIOV, VXUS, and VGLT would be a killer portfolio.

Well, when a chosen fund doesn't perform as expected, folks always say that it had too many mid-caps and wasn't valuey enough. I bought Vanguard Small-Cap Value Index ETF before I read criticisms of it. Last I looked, the Vanguard product, despite its shortcomings, had been outperforming the DFA Small-Cap Value fund. Not surprising as larger, growthier stocks have been outperforming Value since the 2008-2009 financial crisis. So I did it all wrong and then found out I wasn't so wrong after all.

The tilting strategies are easier in theory than they are in practice. This is true of other investment strategies as well. One reason a lot of folks have thrown in the towel and just index. I guess I am an eternal optimist.

Its IJS/VIOV -- S&P600 Value ETF. Oh and VIOV is available at an expense of 0.20%.

The S&P Indexes are really good. I wish I had purchased that rather than the Vanguard Small-Cap Value Index ETF but I haven't checked to see which one actually has done better. I own the S&P 600 Small-Cap Index ETF and it has been a great investment, I suspect the Value version of the S&P 600 has done really well too. Anywho, I can blame it on Paul Merriman and his company which recommended the Vanguard Small-Cap Value Index ETF. Oh well. I will just blame the choice of indexes.

Edit: Just looked it up on Morningstar, IJS has outperformed VBR. Confirms my suspicions.

There is no one true definition of the word "Smallcap". The Vanguard fund defines it as the smallest 15% of the market by market cap (if I'm remembering correctly).

Well, sometimes close enough is close enough. Mid-Caps perform in a similar fashion to Small-Caps, tend to have a little less return with a little less volatility. Many feel that Mid-Caps are the "sweet spot" of the stock market. I would not obsess over this.